Tribunal validates Corporate Guarantee, initiates Insolvency Resolution Process

The Tribunal found the Corporate Guarantee valid and enforceable, within the limitation period, and authorized the applicant Bank to file the application. The guarantee was deemed invoked, and the Tribunal had jurisdiction to proceed. The Financial Creditor's entitlement to claim dues was established, leading to the initiation of the Corporate Insolvency Resolution Process against the corporate debtor. The Tribunal admitted the application, appointed an Interim Resolution Professional, and imposed a moratorium to protect the corporate debtor during the insolvency process.

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Issues Involved:
1. Validity of the Corporate Guarantee.
2. Limitation period for initiating insolvency proceedings.
3. Authority to file the application.
4. Invocation of the Corporate Guarantee.
5. Jurisdiction of the Tribunal.
6. Financial Creditor's entitlement to claim dues.

Detailed Analysis:

1. Validity of the Corporate Guarantee:
The applicant, IDBI Bank Ltd., filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate the Corporate Insolvency process against the Corporate Debtor, who had provided a corporate guarantee for securing financial assistance to M/s. Doshion Water Solution Private Limited. The corporate debtor had executed a Corporate Guarantee Agreement dated 27.06.2014, which was deemed irrevocable and unconditional, securing credit facilities amounting to Rs. 408.64 crores. The Tribunal found that the corporate debtor had acknowledged the guarantee and executed requisite documents, making the guarantee valid and enforceable.

2. Limitation Period for Initiating Insolvency Proceedings:
The applicant issued a recall notice on 20.09.2016 and a guarantee invocation notice on 04.11.2016. The Borrower's loan account was classified as NPA on 30.04.2016. The present application was filed on 26.10.2018. The Tribunal held that the application was within the limitation period, considering the revival letter dated 07.03.2017, which acknowledged the debt, thereby extending the limitation period.

3. Authority to File the Application:
The corporate debtor contested the authority of the person filing the application on behalf of the applicant Bank. The Tribunal examined the "Delegation of Powers" approved by the Board of Directors of the applicant Bank, which empowered the Deputy General Manager (DGM) to act on behalf of the Bank. The Tribunal found that the application was filed under valid authorization, as the delegation of power was duly approved by the Deputy Managing Director on 18.11.2017.

4. Invocation of the Corporate Guarantee:
The corporate debtor argued that the guarantee was not formally invoked. The Tribunal found that the applicant had issued a recall notice on 20.09.2016 and invoked the corporate guarantee on 04.11.2016. The corporate debtor had acknowledged the debt in the revival letter dated 07.03.2017. The Tribunal held that the guarantee was validly invoked, and the corporate debtor was liable to pay the outstanding dues.

5. Jurisdiction of the Tribunal:
The registered office of the corporate debtor is situated in Ahmedabad, Gujarat State. Therefore, the Tribunal held that it had jurisdiction to entertain and try the application.

6. Financial Creditor's Entitlement to Claim Dues:
The Tribunal found that the applicant had established the default in payment of the financial debt beyond doubt. The corporate debtor executed documents binding itself for the liability of the principal Borrower as a guarantor to repay the debt jointly and severally. The Tribunal admitted the application and ordered the initiation of the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor.

Conclusion:
The application was complete in terms of Section 7(5) of the Code, and the applicant was entitled to claim its dues. The Tribunal admitted the application and appointed Mr. Ramchandra Dallaram Choudhary as the Interim Resolution Professional (IRP). The Tribunal directed the Financial Creditor to deposit a sum of Rs. 2.00 lacs with the IRP for meeting the expenses of the CIRP. The Tribunal also imposed a moratorium as envisaged under Section 14(1) of the Code, prohibiting certain actions against the corporate debtor during the insolvency process.

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